Gold Rush

The gold price took an abrupt U-turn Friday with the contract for April delivery down about $14 to $913. But the fundamental reasons gold recently surpassed previous record highs, and was up by 10 per cent in January, haven’t changed. The U.S. economy may be in, or on the brink of, recession; the value of the U.S. dollar has collapsed, the fallout from the subprime mortgage fiasco looms like a black cloud, and inflation is creeping higher as interest rates fall. In fact, central banks are under pressure to keep asset price inflation going and currency debasement is the inevitable consequence. All of that suggests gold may continue to appreciate. I wrote a column on the subject, available right here.